Correlation Between Gamma Communications and Ball Corp
Can any of the company-specific risk be diversified away by investing in both Gamma Communications and Ball Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Gamma Communications and Ball Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications PLC and Ball Corp, you can compare the effects of market volatilities on Gamma Communications and Ball Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Gamma Communications with a short position of Ball Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Ball Corp.
Diversification Opportunities for Gamma Communications and Ball Corp
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gamma and Ball is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Ball Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ball Corp and Gamma Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Gamma Communications PLC are associated (or correlated) with Ball Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ball Corp has no effect on the direction of Gamma Communications i.e., Gamma Communications and Ball Corp go up and down completely randomly.
Pair Corralation between Gamma Communications and Ball Corp
Assuming the 90 days trading horizon Gamma Communications PLC is expected to under-perform the Ball Corp. In addition to that, Gamma Communications is 1.21 times more volatile than Ball Corp. It trades about -0.37 of its total potential returns per unit of risk. Ball Corp is currently generating about -0.04 per unit of volatility. If you would invest 5,556 in Ball Corp on October 24, 2024 and sell it today you would lose (64.00) from holding Ball Corp or give up 1.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.47% |
| Values | Daily Returns |
Gamma Communications PLC vs. Ball Corp
Performance |
| Timeline |
| Gamma Communications PLC |
| Ball Corp |
Gamma Communications and Ball Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and Ball Corp
The main advantage of trading using opposite Gamma Communications and Ball Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma Communications position performs unexpectedly, Ball Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ball Corp will offset losses from the drop in Ball Corp's long position.The idea behind Gamma Communications PLC and Ball Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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